Monday, July 20, 2009

The President is fast becoming the poster child for "How can you tell a politician is lying?" In his speech July 20, 2009 on health care I was wondering what country he was talking about. It was certainly no country with which I was familiar. Here is a sampling of what was said "We spoke about the amount of time and money wasted on insurance-driven bureaucracy. We spoke about the growing number of Americans who are uninsured and underinsured. We spoke about what's wrong with a system where women can't always afford maternity care and parents can't afford checkups for their kids, and end up seeking treatment in emergency rooms like the ones here at Children's. We spoke about the fact that it's very hard even for families who have health insurance to access primary care physicians and pediatricians. In a city like Washington, D.C., you've got all the doctors in one half of the city, very few doctors in the other half of the city. And part of that has to do with just the manner in which reimbursement is taking place and the disincentives for doctors, nurses, and physicians assistants in caring for those who are most in need." "Now, we've talked this problem to death, year after year. But unless we act -- and act now -- none of this will change. Just a quick statistic I heard about this hospital: Just a few years ago, there were approximately 50,000 people coming into the emergency room. Now they've got 85,000. There's been almost a doubling of emergency room care in a relatively short span of time, which is putting enormous strains on the system as a whole. That's the status quo, and it's only going to get worse." I thought for a moment he was talking about the doctor "shortage" in Canada where there are few doctors and dentists in rural areas. Or maybe he was talking about emergency room usage in Massachusetts going up after institution mandatory statewide health care. Or maybe he was talking about the administrative waste in medicare where the cost per patient is 25 percent higher than under private plans. What about cost containment? Would someone please tell me how the federal government is supposed to contain the cost of health care? Lets look at medicare and medicaid. Medicare's growth in spending is outpacing its revenue growth and its spending is expected to double in the next 25 years. We all have seen the projects that the Medicare Trust fund will run out of money by 2025. Medicaid, an open ended entitlement with no defined limit on beneficiaries or costs, is projected to grow at an annual rate of 7.9 percent by 2017 almost double the projected growth in the economy. One study finds that Medicaid has encouraged overutilization of health care resources without real evidence of improving health of the poor. Lastly, overutilization of emergency rooms is given as one of the country's major problems because the uninsured are forced to seek medical care there. Well a study of ER use in Massachusetts is an eyeopener. If finds that "non-urgent — use of the Emergency Room was not limited to uninsured populations. It showed up across the board. People covered by private insurance, Medicaid and Medicare were just as likely to use the ER for non-urgent care as people without health insurance. About 20% of all ER visits by privately insured and Medicare patients were for non-urgent purposes. About 24% of all ER visits by Medicaid beneficiaries and people without any insurance were for non-urgent purposes.Second, another 25% of all ER visits for each group were for primary care treatable/preventable maladies. In other words, almost half of all ER visits were either for conditions that could have waited at least 24 hours to be addressed, or could have been solved in a doctor’s office."

What all of this means is that the President is trying to manufacture a crisis in order to ram through his health care takeover. Never mind that the Federal government has failed at containing costs of its health care programs. Never mind that the problem of ER use will not go away. Never mind that the proposed solutions are no solutions at all. I think the President really knows - just like the rest of us - that a national healthcare system will not improve health care, will not contain costs and will make all of us worse off. However, it will give the government control of one-sixth of GDP and control over the most vital aspect of our lives. So is it any wonder that he and the democrats are rushing this through at breakneck speed?

Later today, their voices will be heard in a U.S. Senate minority report quoting the scientists, many of whom are current and former members of the U.N.'s own Intergovernmental Panel on Climate Change.

About 250 of the scientists quoted in the report have joined the dissenting scientists in the last year alone.

In fact, the total number of scientists represented in the report is 12 times the number of U.N. scientists who authored the official IPCC 2007 report. Here are some choice excerpts from the report:• "I am a skeptic ... . Global warming has become a new religion." -- Nobel Prize Winner for Physics, Ivar Giaever.• "Since I am no longer affiliated with any organization nor receiving any funding, I can speak quite frankly ... . As a scientist I remain skeptical." -- Atmospheric Scientist Dr. Joanne Simpson, the first woman in the world to receive a Ph.D. in meteorology and formerly of NASA who has authored more than 190 studies and has been called "among the most pre-eminent scientists of the last 100 years."• Warming fears are the "worst scientific scandal in the history ... . When people come to know what the truth is, they will feel deceived by science and scientists." -- U.N. IPCC Japanese Scientist Dr. Kiminori Itoh, an award-winning Ph.D. environmental physical chemist.• "The IPCC has actually become a closed circuit; it doesn't listen to others. It doesn't have open minds ... . I am really amazed that the Nobel Peace Prize has been given on scientifically incorrect conclusions by people who are not geologists." -- Indian geologist Dr. Arun D. Ahluwalia at Punjab University and a board member of the U.N.-supported International Year of the Planet.• "The models and forecasts of the U.N. IPCC "are incorrect because they only are based on mathematical models and presented results at scenarios that do not include, for example, solar activity." -- Victor Manuel Velasco Herrera, a researcher at the Institute of Geophysics of the National Autonomous University of Mexico.• "It is a blatant lie put forth in the media that makes it seem there is only a fringe of scientists who don't buy into anthropogenic global warming." -- U.S. Government Atmospheric Scientist Stanley B. Goldenberg of the Hurricane Research Division of NOAA, the National Oceanic and Atmospheric Administration• "Even doubling or tripling the amount of carbon dioxide will virtually have little impact, as water vapor and water condensed on particles as clouds dominate the worldwide scene and always will." -- Geoffrey G. Duffy, a professor in the Department of Chemical and Materials Engineering of the University of Auckland, New Zealand.• "After reading [U.N. IPCC chairman] Pachauri's asinine comment [comparing skeptics to] Flat Earthers, it's hard to remain quiet." -- Climate statistician Dr. William M. Briggs, who specializes in the statistics of forecast evaluation, serves on the American Meteorological Society's Probability and Statistics Committee and is an associate editor of Monthly Weather Review.• "For how many years must the planet cool before we begin to understand that the planet is not warming? For how many years must cooling go on?" -- Geologist Dr. David Gee, the chairman of the science committee of the 2008 International Geological Congress who has authored 130 plus peer-reviewed papers, and is currently at Uppsala University in Sweden.• "Gore prompted me to start delving into the science again and I quickly found myself solidly in the skeptic camp ... . Climate models can at best be useful for explaining climate changes after the fact." -- Meteorologist Hajo Smit of Holland, who reversed his belief in man-made warming to become a skeptic, is a former member of the Dutch U.N. IPCC committee.• "Many [scientists] are now searching for a way to back out quietly (from promoting warming fears), without having their professional careers ruined." -- Atmospheric physicist James A. Peden, formerly of the Space Research and Coordination Center in Pittsburgh, Pa.• "Creating an ideology pegged to carbon dioxide is a dangerous nonsense ... . The present alarm on climate change is an instrument of social control, a pretext for major businesses and political battle. It became an ideology, which is concerning." -- Environmental Scientist Professor Delgado Domingos of Portugal, the founder of the Numerical Weather Forecast group, has more than 150 published articles.• "CO2 emissionsmake absolutely no difference one way or another ... . Every scientist knows this, but it doesn't pay to say so ... . Global warming, as a political vehicle, keeps Europeans in the driver's seat and developing nations walking barefoot." -- Dr. Takeda Kunihiko, vice-chancellor of the Institute of Science and Technology Research at Chubu University in Japan.• "The [global warming] scaremongering has its justification in the fact that it is something that generates funds." -- Award-winning Paleontologist Dr. Eduardo Tonni, of the Committee for Scientific Research in Buenos Aires and head of the Paleontology Department at the University of La Plata.

The report also includes new peer-reviewed scientific studies and analyses refuting man-made warming fears and a climate developments that contradict the theory.

Monday, July 6, 2009

The Federal Reserve is a curious creation. In an effort to keep it insulated from the political whims of the president and the congress, it was made as independent as a central bank can be - with one exception. Its seven governors serve 14 year terms and once appointed by the president and confirmed by the senate cannot be fired - only impeached. Its chairman is appointed to a 4 year term which is staggered with that of the president's so a new president has to wait two years to appoint the chairman. The Fed is off budget and self funding so congress cannot influence the Fed's decisions by controlling its funding. The Open Market Committee which sets and implements monetary policy is made up of the 7 governors, the president of the New York Fed and three of the other 11 reserve bank presidents who serve on a rotating basis. The banks that are members of the Fed have limited influence on the Board of Governors and the chairman in that they do not have direct input over Fed decisions. The member banks do elect directors of the reserve banks, but those directors essentially serve only a limited advisory role and have no direct voice in either the running of the reserve bank or on monetary policy. I know there are all sorts of conspiracy theories out there but none make a great deal of sense once scrutinized. The recent financial "reform" legislation introduced would give the Fed some additional oversight responsibilities but that legislation discussed below goes in the wrong direction. The Fed argues that it needs hands on regulatory authority in order to conduct monetary policy. This is bogus. The Fed has always been a power hungry institution and simply wants to gain more power - like any politician or regulator. In reality regulatory oversight distracts the Fed. It should not write banking regulations, it should not regulate state member banks, bank holding companies, financial holding companies, foreign banks operating in the US or US banks operating abroad. The Fed should only concentrate on monetary policy. Oh. As to the one thing missing from insulating the Fed? It should not be located in Washington, DC. Here the Fed is acutely aware of the pressures applied by the administration and the congress. Fed governors live in the area surrounded by neighbors who live off the Federal government and are directly influenced by Fed decisions. Research has shown that the Fed is influenced by all these factors if only by osmosis. What can be done? Move the Fed to Kansas City. There, surrounded by real people who have to actually work at productive ventures for a living, the Fed would make better and more rational decisions.

Proposals don't fix reason for crisis

By Dr. Harold Black

Knoxville News- Sentinel Sunday, July 5, 2009

Politicians, like generals, fight the last war. A clear case in point is the proposed legislation on financial institutions.

The main parts are that the FDIC would be able to seize nonbank companies that pose a systemic risk to the economy, the Office of Thrift Supervision will be merged into the Office of the Comptroller of the Currency, financial companies would be required to hold more capital, hedge funds would get regulatory oversight, a new consumer agency would be created to regulate financial products, and the Fed would get oversight authority over all big financial companies.

These proposals are backward-looking. The power to seize nonbanks was likely prompted by the failure and subsequent bailout of AIG. The imposition of more capital would lessen the cost of failure to the government but not lower the likelihood of failure. The government has always wanted to regulate hedge funds, and the financial crisis gives it that opportunity, even though hedge funds had nothing to do with the financial crisis. There were critics of some financial products offered to consumers, but the banking agencies already had oversight responsibilities, making the new agency redundant. Since the Fed already regulates bank holding companies and financial holding companies, the new legislation must intend to include financial institutions that are not members of holding companies.

The merger of the OTS into the OCC is of little consequence.

Note that none of the proposals addresses the reasons for the financial crisis - namely asset bubbles. Remember when Alan Greenspan said in 1996 referring to the stock market that "irrational exuberance has duly escalated asset values?" That bubble was fueled by the dot-com craze and wiped out more than $5 trillion in market value. Although the rules will do nothing to prevent asset bubbles, at least they also will do little harm - which is in direct contrast to cap-and-trade, which arguably is the single worse piece of congressional legislation in the history of the republic.

What to do? Here is some unsolicited advice from someone who has taught regulation, written regulation, headed a federal regulatory agency, and been the subject of regulation as a director of one of the nation's largest savings and loans and as a director of the nation's largest real estate investment trust:

n There is no such thing as systemic risk. If it is too large to fail, it is too large to exist. Use the existing anti-trust legislation to limit monopolies (private or government) and to encourage competition.

n The market is always ahead of regulation. Enact rules that make market participants apply for use of new instruments and explain their risk. The regulator would have 90 days to either approve or disapprove. If no action is taken, then the instrument can be used.

n Prevent asset bubbles. Both the New York Stock Exchange and Nasdaq can suspend trading of company stocks and that of the entire exchange. The SEC also can suspend trading if it "is in the public interest."

About Me

Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com